Delaware security deposit law: the escrow account, the 20 day list and double damages
Delaware 25 Del. C. 5514 requires every deposit to sit in a designated escrow account, limits most deposits to one month's rent and gives a landlord twenty days after the rental agreement ends to send an itemized list of damages and repay the difference. Missing the deadline can cost double.
How much can the deposit be?
Section 5514(a) allows a landlord to require a deposit, then sets limits in three situations. For a rental agreement of one year or more, the deposit cannot exceed one month's rent. For a primary residential tenancy with an undefined term or month to month, once the tenancy has lasted a year the same one-month limit applies, and the landlord must immediately credit back any excess to the tenant. Furnished units are outside these limits.
The text states limits for agreements of a year or more and for month-to-month tenancies that reach a year. It does not say in that subsection what applies to a fixed term shorter than a year, so a short-term lease with a high deposit is a point to confirm with a Delaware attorney.
Where does the money have to sit?
Subsection (b) is detailed. Each deposit goes into an escrow bank account at a federally insured institution with an office that accepts deposits in Delaware. The account is designated as a security deposits account and is not to be used in the operation of any business by the landlord. You must tell the tenant where the account is. The tenant's claim to the money ranks ahead of the landlord's creditors, including a trustee in bankruptcy, even if the funds were mixed.
The consequence of getting this wrong is spelled out in subsection (g)(2): failing to disclose the account location within twenty days of a written request, or failing to deposit the money in a qualifying institution, is a forfeiture of the deposit to the tenant. If you then fail to return the full deposit within twenty days of the forfeiture's effective date, the tenant can claim double.
What does the 20 day rule require?
Within twenty days after the rental agreement ends, you give the tenant an itemized list of damages with the estimated cost of repair for each, and pay the difference between the deposit and those costs. Failing to do so is an acknowledgment that no payment for damages is due. If the tenant accepts a payment that came with an itemized list, that counts as agreement on the damages unless the tenant objects in writing within ten days of receiving it.
Example a made-up Delaware unit rents for $1,300 and the deposit is $1,300. A tenant leaves on September 30. The landlord's list, sent by October 20, charges $210 to replace a door and $90 to repair a wall, and the check for $1,000 goes with it. If the tenant does not object in writing within ten days of receiving the payment, the tenant has agreed to those two lines.
Notices go to the landlord's address in the rental agreement and to the tenant's address in the agreement or a forwarding address given in writing by the termination date. If the tenant gives no address, you are relieved of the notice duty and the double-damages exposure, but you stay liable for the unused deposit if the tenant claims it in writing within one year.
What can the deposit be used for?
- Actual damage beyond normal wear and tear, or damage that cannot be corrected by painting and ordinary cleaning.
- Rent arrears, including late charges and rent due for premature termination or abandonment.
- Reasonable renovating and re-renting costs caused by premature termination, with a one month cap on that item when the tenant ended the lease under the military termination section.
Pets, applications and surety bonds follow their own rules. A pet deposit is allowed but cannot exceed one month's rent regardless of the lease length, and it is subject to the same account, return and penalty rules. An application fee cannot exceed the greater of ten percent of monthly rent or $50, and you keep records of those fees for two years. Section 5514A lets a tenant buy a surety bond instead of paying a deposit, with the combined amount staying within the one month limit.
Using DoorKeeping in Delaware
Because the statute cares about where the money is, DoorKeeping shows which bank account holds each property's deposits and lets you write the location on the lease and tenant record. It counts the twenty days, gathers your inspection photos and drafts the itemized list for you to review. You approve, and your funds stay in your own bank. This is general information, not legal advice. Check the current statute or ask a local attorney before you rely on it.
Sources
Questions
- What is the maximum deposit in Delaware?
- For rental agreements of one year or more, and for month-to-month tenancies that reach one year, one month's rent. Furnished units are not covered by these limits.
- How many days does a Delaware landlord have to return a deposit?
- Twenty days after the rental agreement ends, with an itemized list of damages and the estimated repair cost for each.
- What is the penalty in Delaware?
- Double the amount wrongfully withheld, and forfeiture of the deposit if the escrow account location is not disclosed on request or the money is not held in a qualifying bank.